Actuarial Equity

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DEFINITION of 'Actuarial Equity'

The calculation of an insurance premium based on crucial factors such as the applicant's age, gender, health, family history and the type of insurance coverage applied for. This allows insurers to treat applicants fairly according to their estimated risk levels.

INVESTOPEDIA EXPLAINS 'Actuarial Equity'

In automobile insurance, insurers use age as a rating factor in determining individual premiums. Thus, because young people tend to have less favorable driving records as a group, these individuals are required to pay out more in premiums, which normally include the expected value of losses.